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Post Mortem

A (somewhat premature) newspaper autopsy.

If the New York Post should ever close its doors, after a ­two-century-plus history, the man most responsible for this will be Chase Carey, who has been chief operating officer of Rupert ­Murdoch’s News Corp. for a dozen years. Murdoch’s ­company owned 140-odd ­newspapers and publications from England to Australia to New York, and Carey, tightly focused on the company’s ­bottom line, wanted to get all of them off the ­company’s books, since they had been ­underperforming the rest of the assets, and industry signs were ominous.

To Carey, the Post in particular was a ­flagship of “financial irrationality,” in the words of one News Corp. executive. The numbers are stunning. The Post, according to insiders, currently racks up losses of more than $50 million a year, significant even to a company with around $3 billion in annual profits.

Carey’s problem was that, rational or not, 82-year-old News Corp. CEO and chairman Rupert Murdoch loves news­papers. And since he’d relocated to New York in the mid-seventies, the Post has been his favorite—his “baby”—which made it untouchable.

But Carey, a skilled and artful Rupert-whisperer, bided his time, and finally an opportunity arrived. “He saw an opening and drove through it,” said the same News Corp. executive. The precipitating cir­cum­­stance was the scandal that engulfed Murdoch’s British newspapers when, in 2011, it was discovered that his Fleet Street reporters had hacked into the voice-mails of ordinary citizens and bribed government officials. Nearly 40 of his journalists and executives and other employees were arrested, including top executive Rebekah Brooks. Her trial is slated to begin at the end of October. News of the World, one of London’s most venerable papers, was shuttered to try to cauterize the scandal, and Rupert was summoned to testify before a parliamentary committee, where he was forced to declare himself humbled.

Bad as all this was, the most troubling fallout for executives was the scandal’s effect on shareholders—it brought long-held reservations about the company’s unorthodox stewardship into the open. Analysts had for decades grumbled about the “Rupert discount,” as one dubbed it: The chairman’s attachment to the ­newspaper business depressed News Corp. stock by as much as 30 percent, according to some estimates. And now, finally, the scandal had thrown the issue into high relief.

Carey, a low-key Harvard M.B.A. with an antic mustache, had for years casually floated the idea of a spinoff company, and now began a quiet lobbying campaign. His office is next to Murdoch’s at News Corp.’s Sixth Avenue headquarters, and over a period of months, Carey shuttled between them, building an argument for quarantining the newspapers inside a separate company. For Carey, it was a risk—if he lost, it could damage his career in the company. But he knew that the board of directors, heretofore loyal to Murdoch, had moved toward his position.

At first, Murdoch vacillated. As one ­colleague put it, “It’s a big decision, and you can’t undecide.”

Then in mid-June, shortly before the board of directors met in Rome to consider a split, Carey and Murdoch had a climactic discussion in the chairman’s office. Carey had one more bit of leverage: Murdoch’s son James had been in charge of the division that runs the British newspapers as the scandal escalated, and some accused him of complicity in a cover-up. A company split, isolating James, the media empire’s heir apparent, from the ongoing newspaper investigations, might further insulate him from the scandal. “I don’t know if Rupert saw it this way, but James did,” said a person who spoke to Rupert.

Rupert capitulated, though he was far from happy about the outcome. “He felt pushed into doing this,” said a person close to the situation. On news of the split, the stock price immediately jumped 8.3 percent.

Murdoch, who remains chairman of both entities (21st Century Fox, composed of 20th Century Fox, Fox Television, and Murdoch’s portfolio of international broadcasting businesses, and the new News Corp., also a public company, comprising The Wall Street Journal, the Post, HarperCollins publishers, and a sprawling archipelago of international publishing and cable holdings) professes not to view the new company as the poor relative. Instead, he indulged in a bit of his trademark braggadocio. “I have the chance to do it all over again,” he said. “There are opportunities everywhere.”

But in most quarters, the split was seen as definitely a wheat-chaff matter: “Shitco,” the new News Corp. was dubbed by staff at one of Murdoch’s papers. And Murdoch’s triumphal rhetoric belies a new reality: The new News Corp. (the split was made official on June 28) reaps one-sixth the profits of the old, making the Post’s losses harder to hide. The markets immediately took notice, with 21st Century Fox’s stock rising and News Corp.’s falling. The Post may, at long last, be forced to sink or swim. “It’s the first question every analyst will ask on earnings calls: ‘How much is the Post losing?’ ” said one analyst.